Chaos and Sector-specific Externalities

David R. Stockman ()

No 07-17, Working Papers from University of Delaware, Department of Economics

Abstract: Benhabib and Farmer (1996) explore the possibility of local indeterminacy in a twosector model with sector-speci c externalities. They nd that very small sector-specific externalities are su cient for local indeterminacy. In this case, it is possible to construct sunspot equilibria where extrinsic uncertainty matters. In this paper, I provide a global analysis of their model revealing the existence of Euler equation branching. This branching allows for regime switching equilibria with cycles and chaotic behavior. These equilibria occur whether the \local dynamics" are determinate or indeterminate.

Keywords: two-sector model; regime switching; global indeterminacy; cycles and chaos (search for similar items in EconPapers)
JEL-codes: E13 E32 E62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2007-08
View list of references

Downloads: (external link)
http://www.lerner.udel.edu/economics/WorkingPapers/2007/UDWP2007-17.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:dlw:wpaper:07-17.

Access Statistics for this paper

More papers in Working Papers from University of Delaware, Department of Economics
Contact information at EDIRC.
Series data maintained by Saul Hoffman ().